Dow jumps over 450 points as investors bet the worst is over.
NEW YORK (CNNMoney.com) -- Stocks rallied Monday morning as investors welcomed the global response to the credit crisis, including the Treasury's plan to buy equity stakes in banks.
The Dow Jones industrial average (INDU) gained 450 points or 5.5% in the early going, while the Standard & Poor's 500 (SPX) index rose 5.6% and the Nasdaq composite (COMP) added 5.7%.
Investors are hoping that the worst may be over for the financial market crisis, and that stocks will start to recover after the major gauges have tumbled to more than 5-year lows.
Last week was the Dow's worst ever, ending a stunning eight-session selloff that seared 2400 points off the blue-chip indicator. Last week's declines alone wiped out $2.4 trillion in market value, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.
But stocks were buoyant Monday morning as investors welcomed a series of announcements from officials in the both the U.S. and Europe meant to unfreeze the credit markets and get money flowing through the system again.
Previous efforts to address the crisis, including an emergency interest rate cut from the federal reserve, failed to soothe stock investors. But the most recent actions seemed to be helping, although credit markets barely budged.
The latest: On Monday, Neel Kashkari, assistant Treasury Secretary and interim head of the $700 billion bailout program - outlined some of the steps the government will take in the weeks and months ahead. The program includes buying soured mortgage assets from banks and buying stock in a number of financial institutions. (Full story)
Meanwhile, House Democrats are meeting Monday to put together a second economic stimulus package that could be worth $150 billion, although House Republicans are reportedly skeptical, CNN reports.
World leaders met over the weekend to come up with solutions. After an emergency meeting Sunday, 15 European nations agreed to help their troubled banks by adding capital and guaranteeing inter-bank lending. (Full story)
Additionally, the British government said it would pump $63 billion into three of the country's banks.
And the U.S. central bank said it will offer an unlimited amount of dollars to three other central banks in an effort to keep money flowing. (Full story)
Besides the emergency rate cut, the Fed has pledged to help U.S. companies by buying short-term debt directly from businesses. The central bank has also made billions available to banks in return for damaged assets.
In other bank news, Morgan Stanley has completed plans to sell part of itself to Japanese bank Mitsubishi UFJ. The $9 billion deal gives the company a 21% stake in Morgan Stanley. Morgan (MS, Fortune 500) shares jumped 50%.
Credit markets still frozen: The recently-announced initiatives made a small dent in the lending freeze Monday, although conditions remained tight.
The three-month Libor, or what banks charge each other to borrow for three months, eased to 4.75% from a 2008 high of 4.82% Friday.
The Libor-OIS spread, a measure of cash scarcity, eased to 3.61 from a record 3.67 Friday, suggesting cash is more available than at the end of last week.
The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, fell to 4.57% after spiking to an all-time high of 4.65% Friday.
The wider the spread, the more reluctant banks are to lend to each other, rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.
Treasury bond markets are closed Monday for Columbus Day. (Full story)
Other markets: U.S. light crude oil for November delivery gained $2.71 to $80.41 a barrel on the New York Mercantile Exchange. On Friday, oil prices plunged more than $8 to a 13-month low.
Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11.
The price of gas decreased for the 26th consecutive day, according to a survey of credit card activity by motorist group AAA.
COMEX gold for December delivery tumbled $13.20 to $845.80 an ounce.
In currency trading, the dollar slumped against the euro and the yen. 
Aucun commentaire:
Enregistrer un commentaire